Singapore ISPs jointly slam SingTel's proposed OpenNet acquisition

In a strongly-worded statement, six local telcos and a coalition of Asia-Pacific carriers are opposing the proposed deal which will indirectly give SingTel total ownership of Singapore's fiber broadband network builder.

OpenNet's four shareholders plan to sell their stakes for S$126 million to NetLink Trust.

While NetLink Trust is owned by SingTel, it's parked under trustee-manager CityNet. This means legally SingTel only derives economic benefits but has no effective control over major decisions.

However, CityNet is only obliged to act in the interest of the trust's unitholder, SingTel, and not bound to serve the industry.

In a rare show of solidarity, six Singapore broadband players and a coalition of Asia-Pacific carriers have jointly opposed the proposed deal by SingTel-owned NetLink Trust to buy out the country's fiber network builder, OpenNet.

The protest came from local Internet service providers StarHub, M1, MyRepublic, Viewqwest, Nucleus Connect, and SuperInternet, together with the Asia Pacific Carriers' Coalition (APCC)--which includes AT&T, BT, and PacNet.

"If approved, the proposed consolidation would see SingTel becoming the 100 percent beneficial owner of the only other nationwide fixed telecommunications network in Singapore, apart from SingTel's own network," noted the joint media statement. The S$126 million acquisition of OpenNet was proposed last month promising "greater efficiencies" via integration with NetLink Trust, under the care of a trustee manager CityNet.

The group added SingTel's business trust used in the proposed consolidation had statutory and contractual obligations to act in the telco's interests.

"The unprecedented show of solidarity demonstrates the grave concerns the industry has over the competition issues raised by the proposed consolidation, including the potential of discriminatory treatment and a lack of independence," the group added.

Key issues not addressed

Their joint 38-page submission was in response to the Infocomm Development Authority of Singapore (IDA)'s call for public feedback on the deal, which had earlier drawn flak amid public scrutiny.

The concerns raised included:

Potential "monopoly":The group pointed out the ownership structure would favor SingTel, because NetLink Trust's trustee-manager CityNet was bound by law to serve only the interest of the trust's unitholder. Hence it would neither be a neutral or independent entity serving the best interests of the industry.

Delayed divestment potentially anti-competitive:Under earlier regulatory conditions, SingTel was bound to sell down its stake in NetLink Trust by April 2014 to under 25 percent, which the telco is now requesting for a delay till 2018.

As part of conditions to ensure fair competition when SingTel won its bid in 2008 as part of the OpenNet consortium, it was required to set up an independent asset company--NetLink Trust-- to park assets such as ducts, manholes and exchanges which it owned as the telecoms incumbent. Having access to these assets speeds up the network rollout, allowing non-incumbents to start services.

"Today, the industry is already being crippled by OpenNet's less than satisfactory deployment of fiber and the extremely slow process of SingTel transferring its underlying passive infrastructure assets to CityNet," the group noted.

Lack of transparency:According to the group, there were no guarantees that the public and the industry will benefit in practical terms. It added beyond the "rhethoric on integration benefits", no specifics have been shared on how unresolved industry problems will be addressed.

"This is especially troubling given OpenNet's history of rollout delays, missed appointments, and inadequate quality of service," they said. The group added while SingTel had commited to remove itself as the Key Subcontractor for OpenNet to reduce conflict of interest, there was nothing stopping the new entity from reappointing the telco.

Scrutiny over neutrality of entity serving industry

Among suggestions proposed as safeguards if the deal were to go through, the group recommended including government and industry representatives on the boards of CityNet or OpenNet. Besides the group, IDA also received three feedback submissions from individuals.

Jacqueline Ong, acting CEO of CityNet, said the transaction would not compromise the level playing field and open access of Singapore nationwide fiber network. "The terms, conditions and prices of OpenNet's services are, and will continue to be, regulated by the IDA," she said.

Ong added there were safeguards in place to prevent SingTel from having effective control over its business trust. For example, CityNet's independence is preserved by a majority-independent board.

In response to ZDNet, SingTel said it did not have effective control over NetLink Trust or CityNet. "NetLink Trust and CityNet operate within a strict regulatory framework that ensures open access to the NextGen NBN fibre network and regulated pricing to all industry operators," said a SingTel spokesperson.

An IDA spokesperson told ZDNet it would examine the proposed transaction's impact on CityNet's independence to ensure the neutrality of the wholesaler of Next Gen NBN services--currently OpenNet--to downstream operators.

The regulator's review will take 120 days, starting from the date of the deal's proposal in August, and will be complete before December 19, 2013.